Energous (NASDAQ:WATT) Corporation (NASDAQ: WATT), a leading developer of wire-free charging technologies, reported full year financial results for 2023, with revenue of approximately $0.5 million, a decrease from the previous year's $0.9 million. Despite the revenue decline, the company achieved a positive gross margin and reduced operating expenses. The leadership transition, with a CEO search underway, was also highlighted, along with the company's continued focus on Smart IoT-centric strategy and its progress in proof-of-concept trials.
Key Takeaways
- Energous Corporation's 2023 revenue was approximately $0.5 million, a 44% decrease from 2022.
- Gross margins improved to 41%, despite an inventory write-down included in the cost of revenue.
- Operating expenses, excluding severance, decreased by approximately $3.5 million to $21.9 million.
- Research and development expenses were reduced primarily due to lower stock-based compensation and other costs.
- The GAAP net loss for 2023 was $19.4 million, an improvement from a loss of $26.3 million in 2022.
- The adjusted non-GAAP net loss for 2023 was approximately $19.1 million, reflecting a $3.5 million improvement year-over-year.
- The company ended the year with $13.9 million in cash and remains debt-free.
- Energous announced a leadership change and is currently in the process of identifying a new CEO.
Company Outlook
- Energous is focused on capitalizing on its first-to-market advantage in wire-free, low-power charging at a distance.
- The company is prioritizing the protection of its intellectual property portfolio and improving operational efficiencies.
- A strategic and deliberate approach is being taken to build the next phase of growth.
Bearish Highlights
- Revenue decreased by 44% compared to the previous year.
- The company experienced an inventory write-down, affecting cost of revenue.
Bullish Highlights
- Gross margin turned positive at 41% versus the negative 50% in the previous year.
- Operating expenses were significantly reduced, and the company improved its net loss position.
- Progress in proof-of-concept trials indicates growing interest and validation of Energous technology.
Misses
- The company did not achieve revenue growth in 2023.
Q&A Highlights
- There was no Q&A session during this earnings call. Investors were invited to submit questions via email.
Energous Corporation's financial results for the full year 2023 reflect a period of transition and strategic refocusing. With a reduction in revenue, the company has nonetheless managed to improve its gross margins and reduce operating expenses. The company is in the process of selecting a new CEO and is optimistic about its Smart IoT-centric strategy, underpinned by a robust patent portfolio. Energous's proof-of-concept trials have expanded, indicating increasing market interest, and the company remains committed to advancing its wireless power technologies.
InvestingPro Insights
Energous Corporation's financial performance has been a topic of interest for investors, and recent data from InvestingPro provides additional context to the company's situation. With a market capitalization of just $12.35 million, the company's size is relatively small, which often correlates with higher risk and volatility in stock performance. This is reflected in the company's highly volatile stock price movements, which is one of the "InvestingPro Tips" for WATT, suggesting investors should be prepared for significant price swings.
The "InvestingPro Tips" also highlight that Energous is quickly burning through its cash reserves. While the company holds more cash than debt, which is generally a positive sign of financial health, the rapid cash burn rate could pose a risk to its long-term viability if not managed properly. Additionally, analysts do not anticipate the company will be profitable this year, and they expect a sales decline in the current year, which could further strain the company's financial resources.
From a valuation perspective, the adjusted P/E ratio over the last twelve months as of Q4 2023 stands at -0.65, indicating that the company is not generating positive earnings relative to its share price. Moreover, the price/book ratio of 1.07 suggests that the stock is trading at a slight premium to the company's book value, which may be a concern given its negative earnings.
Despite these challenges, the stock has experienced a significant return over the last week, with a 15.34% price total return. This performance may be of interest to traders looking for short-term opportunities, but the overall long-term outlook remains uncertain.
For investors seeking more in-depth analysis and additional "InvestingPro Tips", there are 16 total tips available for Energous Corporation on the InvestingPro platform. Interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which could provide further insights into whether WATT is a suitable investment for their portfolio.
Full transcript - Energous Co (WATT) Q4 2023:
Operator: Good day and welcome to the Energous Corporation Full Year 2023 Financial Results. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Craig MacPhail, Investor Relations. Please go ahead.
Craig MacPhail: Thank you, and welcome, everyone. Before we begin, I would like to remind participants that during today's call, the company will make forward-looking statements. These statements are subject to inherent risks and uncertainties that are detailed in the company's filings with the Securities and Exchange Commission. Except as otherwise required by federal laws, Energous disclaims any obligation or undertaking to publicly release updates or revisions to the forward-looking statements contained herein or elsewhere to reflect changes in expectations with regard to those events, conditions and circumstances. Also, please note that during this call, Energous will be discussing non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today's press release, which is posted on the company's website. Please note that we will not be making -- taking questions on this call. Investors are invited to submit any questions to ir@energous.com. Now I would like to turn the call over to Mallorie Burak, Principal Executive Officer and CFO of Energous Corporation. Please go ahead, Mallorie.
Mallorie Burak: Thanks, Craig, and thank you all for joining us. I'm here with Giampaolo Marino, our Vice President of Business Development and Marketing. I know our recent leadership change announcement is on your minds and I will say a few words about that before we get into the business update and review of the 2023 results. I want to start by reiterating that we are thankful to Cesar for his contributions to Energous, and we wish him well in the future. Our Board has initiated a search to identify a new CEO with the support of a search firm. While the search process is underway, the Board has established an Office of the Chair composed of myself and Reynette, our Board Chair, to take on the CEO duties. Together, we will oversee strategic planning and execution. As our Interim Principal Executive Officer, I will take the lead on operational matters, working closely with Giampaolo and our senior leaders, Reynette will provide oversight and support from a Board perspective. Well, I have been in my role as CFO of Energous for just a few months, I bring many years of experience as CFO of high-growth and publicly traded technology companies. Since joining in January, I've had the opportunity to collaborate closely with our Board and senior team, and I'm confident in our ability to continue to deliver on our mission and take advantage of the large market opportunity for us in wire-free, low-power charging at a distance. We believe the important thing to take away from this announcement is that our Board, our leadership team and our -- and the whole Energous team are excited to move forward and build our next phase of growth in a strategic deliberate way. We are intently focused on capitalizing on our first-to-market advantage and prioritizing protection of our intellectual property portfolio, while also improving operational efficiencies as we work toward enabling the next generation of wireless power networks. And with that, I will turn it over to Giampaolo to provide a business update.
Giampaolo Marino: Thank you, Mallorie. Energous continues to successfully execute its Smart IoT-centric strategy initiated in early 2022 when we repositioned and retargeted the company to develop IoT power charging product at a distance using the intellectual property, regulatory knowledge, and market experience developed over the years and backed by our 200-plus patent portfolio, providing Energous with a significant competitive advantage as we work to develop and build a market for a new generation of technology. Our strategy has been focused on enabling new high-value IoT markets such as transportation and logistics and retail IoT with the introduction of Energous wireless power networks. These networks allow our customer greater placement freedom, mobility and lower installation costs by removing wires and batteries across RF tags and sensor application typically within a cloud-enabled environment. As is common when adopting a new technology, our customer initiated wireless powered network technology evaluation and then proof-of-concept installation or we typically call POC. This engagement not only allow business to understand and test the application of the technology to their specific use cases, but also one seeing it deployed and validating the effectiveness of the technology, often time leads to discussion about expansion opportunities and additional application within the large companies with whom we are currently working. Understanding how Energous is progressing with its current customers and its addition of new strategic customers through these POC or trial installation phases is an important indicator of our global adoption of Energous technology and the timing of future revenue. This is why we believe that quarterly updates on the number of POC customers are an important part of our stories and good indicator of our growth. Energous 1W WattUp PowerBridge, we typically called Eagle, is the only advanced and regulatory certified product for wireless power network installation available on the market today worldwide. We will also be launching our new introduced 2 Watt PowerBridge, Condor, product in early Q2. At the end of Q3, 2023, we announced roughly 30 POC trials with multiple customers worldwide across a range of industries. At the conclusion of 2023, customer interest in our product accelerated as the number of company in our focused market increasingly understood the value proposition of Energous wireless power network, which are designed to help business team implement more cost-effective solution that also serve to solve operational bottlenecks due to the high cost of service and maintenance by enabling batteryless BLE tags and center solution and drive automation improvements, improved visibility and improved control through our global supply chain, where even incremental improvements can generate significant value. Through this engagement, we are also becoming highly efficient on IoT wireless power network installation as we gain significant experience and knowledge of the technology system capabilities and related markets. These capabilities enable Energous to provide our customer with insight and recommendation on best installation practices for our technology to yield best results. As such, we recently announced our partnership with the global installer velocity as a preferred system integrator partner and worldwide value-added reseller for our technology. Velociti will deploy advanced enterprise technology solutions to some of the largest brands in the world, provides expansion opportunity into new markets, applications and customer for Energous wireless power technology, across retail, health care, logistics, warehousing and more. Velociti has installed Energous wireless power technology, including 1 Watt and 2 Watt PowerBridge transmitter systems and also installed Wiliot IoT pixel tags at its innovation lab in Riverside, Missouri to showcase advanced use cases across multiple markets and applications. We continue to build momentum in our market and sales development since pivoting to an IoT strategy in 2022. We started with two POC in Q3 2022. We grew to 10, 14 and 20 from Q4 2022 through Q2 2023 respectively. As of Q4 2023 I'm pleased to report that we have 38 POC across the US, Europe and Asia across multiple markets, covering retail, industrial, logistic and supply chain application. It is important to note that a few of these POC are now successfully completed, and we are now moving into a deployment sale phase. Based upon a growing operational need, we find that many of our customer trials are focused on delivering real-time asset tracking and supply chain visibility in cold-chain application for large Fortune 500 organization, enabling their ability to monitor perishable assets in real-time across their supply chain operation. This is a tremendous technology improvement compared to the conventional RFID technology where we can now enable full traceability in an automated labor efficient way. With its robust intellectual property portfolio and proprietary technology, Energous is ideally positioned to be the emerging leader to support and execute our Smart IoT strategy across wireless power network with a solution that we believe addresses key operational pain points from many large organizations. We remain encouraged by the growth in POC trials, which validates this leadership position and attractiveness of our technology across different markets. Our product road map supports both 1 Watt and 2 Watt PowerBridges with a family of advanced proprietary EN4100, EN3210 and EN2223 semiconductor devices. Additionally, as we move forward, we will evolve our road map to support the future 15 Watt regulatory certified market in the US, which will open more markets for our wireless power technology. Strategic partnership within the wireless power ecosystem play an important role in facilitating rapid and more expansive deployment. Today, we are working closely with 18 technology partners, two distribution partners and four IoT system integrators -- partners, all leaders in their respective segment. We expect to engage additional partner as we progress through 2024. On December 13, 2023, we announced our partnership with Identiv (NASDAQ:INVE), a global system integrator, with a specific objective of targeting real-time asset tracking and inventory control for industrial, logistics and retail applications. In January of this year, we attended an RF show in New York. This conference brings together key companies varying field of retail IoT and its ecosystem. In summary, Energous continues to execute on its new go-to-market strategy and is making clear progress as we work to reposition and retarget the company on Smart IoT application. Energous Smart IoT strategy is generating a great deal of interest as evidenced by our 38 POC trial installation where our customers have communicated back to us that they understand the clear value offered by our IoT wireless power network.
Mallorie Burak: Thanks, Giampaolo. Earlier today, we issued our earnings release announcing the operating and financial results for the year ended December 31, 2023. Focusing on the GAAP financial statements, our 2023 recognized revenue was approximately $0.5 million versus $0.9 million reported in 2022 representing a decrease of approximately 44% versus the prior year. Although revenue declined, our cost of revenue in 2023 was approximately $0.3 million yielding a positive 41% gross margin versus the negative 50% gross margin reported in 2022. The 2023 cost of revenue includes an inventory write-down similar to that recorded in 2022. And despite this additional recorded costs, the year-over-year change represents a significant improvement in gross margins versus last year. Total 2023 operating expense, excluding severance decreased by approximately $3.5 million to $21.9 million from the $25.5 million in 2022. Research and development expense decreased by approximately $1.7 million in 2023 to $10.8 million versus $12.5 million incurred in 2022, primarily attributable to a reduction in stock-based compensation of $0.5 million, a decrease of $0.5 million related to lower consulting, third-party and professional service fees, a $0.4 million reduction in engineering supplies, components and chip development due to project timing, a $0.2 million related to reduced regulatory testing and fees and $0.1 million of lower postage related costs. Sales and marketing, general and administrative SG&A expenses for 2023 and 2022 were $11.1 million and $12.9 million, respectively. The reduction of approximately $1.8 million is primarily due to a $1.5 million reduction in personnel-related and stock-based compensation costs, a $0.4 million decrease in sales and marketing-related expenses, an approximate $0.2 million reduction in general and administrative costs and a decrease in insurance premiums and board fees of $0.2 million partially offset by increased costs relating to legal fees, investor relations and corporate expenses of approximately $0.5 million. Severance expenses decreased by approximately $0.4 million to $0.4 million in 2023. The GAAP reported net loss for 2023 was $19.4 million versus a loss of $26.3 million in 2022. We feel it's valuable to share an adjusted net non-GAAP loss for 2023, given the level of noncash related and extraordinary expenses incurred by the company. After adjusting the 2023 GAAP net loss by noncash-related expenses such as depreciation, amortization and stock-based compensation totaling approximately $1.8 million as well as extraordinary expenses such as severance expense of $0.4 million, which includes the associated stock-based compensation expense and by $0.6 million representing the offering costs related to the warrant liability, offset by the change in fair value of the warrant liability of $2.5 million. The 2023 adjusted net loss was approximately $19.1 million as compared to the adjusted non-GAAP loss reported in 2022 of $22.6 million, reflecting a $3.5 million improvement year-over-year. Shifting over to the balance sheet and cash flow. We ended 2023 with $13.9 million in cash and remain debt free. During 2023, we raised approximately $4.2 million through the ATM to supplement our working capital. In addition, we generated approximately $2.8 million in net proceeds through the sale of common stock and prepaid warrants and approximately $0.5 million from the collection of accounts receivable and we continue to focus on opportunities to improve cash flow through sales, improving gross margins and as well as reductions in spending. In closing, I would like to say thank you to all our shareholders, stakeholders and the Energous team members. We look forward to updating you on the company's progress again next quarter and this concludes our year-end 2023 update.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
End of Q&A:
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